What’s a bad credit score?
Understanding your credit score and the credit record it’s based on is an important part of managing your finances. Your credit score influences whether you can borrow money and get approved for things like credit cards, loans or even a mobile phone contract. Generally, the lower your score, the harder it is to get approval.
What’s considered a bad credit score?
Your credit score gives lenders a snapshot of how reliable you’ve been with money you’ve borrowed in the past. It's essentially a reflection of the information in your credit report, which holds all the details about your borrowing history. This includes things like whether you’ve repaid loans on time, how much of your available credit you use, and how often you’ve applied to borrow money. The companies that collect this information are called credit bureaus or credit reference agencies. The major ones in the UK are Experian, Equifax and TransUnion, and they all have different scoring systems:
Experian: scores range from 0-999. Anything below 561 is considered very poor.
Equifax: scores range from 0-1,000. Anything below 438 is considered poor.
TransUnion: scores range from 0-710. Scores under 566 are generally considered poor or very poor.
It's worth noting that they all have their own view on what's considered a ‘good’ or ‘bad’ score.
Why is my credit score low?
There are lots of reasons why your credit score might be on the lower side, and in some cases, it’s not because of anything you’ve done wrong. For example, things like having a limited credit history can make it tough for lenders to judge you accurately. That’s because they rely on your past borrowing and repayment behaviour to assess your creditworthiness. If you haven’t had much of an opportunity to build that history yet, it can result in a lower score.
Here are some other things that can negatively impact your credit rating:
Missed or late payments on bills or loans can drag your score down.
Using up a lot of your credit limit can suggest you rely on borrowing, which lowers your score.
Lots of credit applications for loans or credit cards can lower your score temporarily.
Steps to improve your credit score
Building a good credit score is a gradual process that requires consistency and paying attention to your financial habits. Think of it like establishing a reliable track record for lenders to see. Here are some steps which can help improve your credit score:
Pay bills on time, every time. Set reminders or direct debits to make sure you don’t miss any repayments.
Try to use less than 30% of your total credit limit. Remember, your credit limit is a ceiling, not a target!
Check your credit report for mistakes that might be impacting your score. You can do this for free using services like Credit Karma.
Avoid unnecessary credit applications, and only apply for credit when you need it.
Building a better credit future
Taking steps to improve your score can help you secure better financial products down the line. Tools like Monzo Flex Build could help you manage your finances more effectively and boost your credit score. (Monzo Flex Build 39% APR Representative (variable), 18+, credit subject to status.)
Want to see your own credit insights and understand what affects your score? Check out Monzo's Credit Insights feature to keep an eye on things directly in your app.
This isn't financial advice or personalised to you, and we're not recommending or suggesting you take any particular action. If you're in any doubt about what's right for you, then speak to an authorised financial advisor.
UK residents. 18+ only. Eligibility criteria and Ts&Cs apply.
Using Flex responsibly by paying on time and staying within your limit could help build your credit score over time, as we report to credit reference agencies. If you do not keep the repayments this may negatively impact your credit score.
Representative example: (Monzo Flex) 29% APR representative (variable). £1200 credit limit. 29% yearly interest (variable).
You’ll need a Monzo current account to apply for Flex Build. Eligibility criteria and Ts&Cs apply. UK residents & 18+ years olds only. Missed payments may negatively impact credit scores.
To open Flex Build, you may need to put down a one-time security deposit depending on your credit history.
Representative example: (Monzo Flex Build) 39% APR representative (variable). £350 credit limit. 39% yearly interest (variable).